Commissioner Of Income Tax-Ii-, Chandigarh v. M/S Punjab Energy Development Agency, Chandigarh

Income Tax Appeal No.588 of 2009 1 IN THE HIGH COURT FOR THE STATES OF PUNJAB ANDHARYANA AT CHANDIGARH. Income Tax Appeal No.588 of 2009 Date of Decision:-1.12.2009 Commissioner of Income Tax-II-, Chandigarh ...Appellant Versus M/s Punjab Energy Development Agency, Chandigarh ...Respondent CORAM: HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE MEHINDER SINGH SULLAR Present: Ms.Urvashi Dhugga, Advocate for the appellant.Satish Kumar Mittal J.(Oral): The Department has filed the instant appeal undersection 260-A of the Income Tax Act, 1961 (hereinafter to be referredas “the Act”) against the order dated 29.4.2009 passed by theIncome Tax Appellate Tribunal, Chandigarh Bench-A (hereinafter tobe referred as “the ITAT”), in ITA No.764/Chandi/2008 in case of theassessee for the assessment year 2005-2006 by raising followingsubstantial questions of law:- i. Whether on the facts and in the circumstances of thecase, the Hon'ble ITAT was correct in holding that thereceipts of grants-in-aid by the assessee fromCentral/State Govt. are not voluntary contributions forcase, the Hon'ble ITAT was correct in holding that thereceipts of grants-in-aid by the assessee fromCentral/State Govt. are not voluntary contributions for Income Tax Appeal No.588 of 2009 2 the purpose of section 11 read with 12 of the IncomeTax Act and are thus, not required to be taken intoaccount as income of the assessee for the purpose ofascertaining the amount expended or the amount to beaccumulated? ii. Whether on the facts and the circumstances of thecase, the Hon'ble ITAT was right in holding interestincome to be exempt under section 11 of the IncomeTax Act, 1961? In the aforesaid assessment year, the assessee receivedgrants to the tune of Rs.21,98,35,447/- from the Central and StateGovernments and as per instructions, 85% out of the above saidamount which comes to Rs.18,68,60,130/- was required to be spentbut only an amount of Rs.13,02,12,366/- was spent leaving thebalance of Rs.5,23,55,740/-. During the course of arguments,learned counsel for the appellant has stated that the ITAT haswrongly mentioned in the order that the balance amount wasRs.5,23,55,740/-. In fact, the balance amount comes toRs.5,66,47,764/- instead of Rs.5,23,55,740/- and the same should beread as such. The Assessing Officer while invoking the provisions ofsection 11 (1) read with section 12 (1) of the Act has held that sincethe assessee has not spent 85% amount of above said grants(i.e.Rs.18,68,60,130/-), therefore, the remaining amount ofRs.5,66,47,764/- is liable to be assessed to tax as income of theassessee. Assessing Officer also disallowed the interest incomeearned on surplus funds by holding that the interest income cannotbe treated as income from voluntary contributions. Consequently, the Income Tax Appeal No.588 of 2009 3 income of Rs.28,95,927/- was also held to be taxable. The said order of the Assessing Officer was set aside inappeal by the Commissioner of Income Tax (Appeals), Chandigarhvide order dated 25.6.2008 while holding that these tied up grantscannot be equated with the voluntary contributions and, therefore, itwould not be treated as the income of the assessee. While coming tothe said conclusion, the CIT(A) relies upon the decision of ITAT inITA No.904/Chandi/2006 dated 20.7.2007. Income Tax Appeal No.588 of 2009 3 income of Rs.28,95,927/- was also held to be taxable. The said order of the Assessing Officer was set aside inappeal by the Commissioner of Income Tax (Appeals), Chandigarhvide order dated 25.6.2008 while holding that these tied up grantscannot be equated with the voluntary contributions and, therefore, itwould not be treated as the income of the assessee. While coming tothe said conclusion, the CIT(A) relies upon the decision of ITAT inITA No.904/Chandi/2006 dated 20.7.2007. The second issue was also decided in favour of theassessee while holding that the interest earned by the assessee onthe aforesaid surplus fund will be treated its income for the purposeof sections 11, 12 and 13 of the Act. While deciding this issue, thelearned CIT(A) has again relied upon the aforesaid decision in ITANo.904/Chandi/2006 dated 20.7.2007. Against the aforesaid decisionof the CIT(A), the Department filed the appeal, which was dismissedby ITAT vide impugned order dated 29.4.2009. Against the saidorder, the instant appeal has been filed. Learned counsel for the appellant very fairly states thatboth the aforesaid questions of law have already been answered bythis Court against the revenue. Question No.1 was answered againstthe revenue by this Court in ITA No.190 of 2008 titled “Commissionerof Income Tax, Chandigarh-II Vs. M/s Punjab State Sports Council,SCO 116-117, Sector 34-A, Chandigarh”, which was arising from theorder of ITA No.904/Chandi/2006 dated 20.7.2007. The secondquestion has been decided against the revenue by this Court in ITANo.666 of 2008 on 31.7.2009 in case of Commissioner of IncomeTax Chandigarh-II Vs. M/s Punjab Energy Development Agency, Plot Income Tax Appeal No.588 of 2009 4 No.1-2, Sector 33-A, Chandigarh. In view of the aforesaid factual position, we find no meritin this appeal as both the questions of law have already beendecided against the revenue by this Court. Dismissed. (Satish Kumar Mittal) Judge 1.12.2009AS (Mehinder Singh Sullar) Judge